Relevance and potential of the Arctic Sea Routes on the LNG trade

Abstract

The retreat of the ice around the freezing waters of the Arctic Ocean is opening new waterways where shipping activity could transport commodities between continents. One of the essential products is natural gas - LNG, which is transported in large tankers from exporters to importers. This study aims to explore the dynamics of the LNG trade by using these new tentative routes with conventional sea lanes and estimating the changes in the LNG trade. We utilize Agent-Based Modeling to develop a global LNG model with interactive GIS features, where the agents are the players in the LNG market. The results demonstrate the preponderance of the North-East Passage (NEP, Eurasian Arctic waters) over the North-Western Passage (NWP, the Canadian Arctic) in providing a shortcut connecting Europe with Asia. This passage favors a growing exporter like Russia with exporting facilities in Siberia and future strategic projects to increase liquefaction capacity. The NEP becomes crucial when considering scenarios of a European ban on Russian imports, as European countries are planning due to the crisis with Russia. On the importing side, the Asian Pacific and South Asian importers are the winners with a diverse and shorter LNG supply source. Future Canadian projects may also benefit from these new highways. However, there are also substantial challenges to providing the NEP with the proper infrastructure and systems to make the Polar LNG journeys safe and sound shortly. Beyond that, the Arctic sea corridors may alleviate the high LNG transit through the conventional routes and their chokepoints, but they are not a replacement for the conventional ones, not even with the most favorable conditions.

Keywords

• Agent-based model
• LNG trade
• Arctic sea
• North-East passage
• Northwest passage
• Simulation